PACRA Maintains Entity Ratings of Shahzad Textile Mills Limited

Lahore, October 30, 2019 (PPI-OT): The ratings of Shahzad Textile Mills Limited (Shahzad Textile) reflect improving business profile emanating from better margins and revenue growth. The Company has down-scaled its spinning capacity by disposing obsolete machinery and replacing it with socks manufacturing unit. Lately, textile industry has suffered from low international commodity prices due to global economic slowdown.

However, the impact was largely mitigated by notable rupee devaluation in FY19. On standalone basis, the Company’s margins witnessed an improvement, driven by; i) prudent inventory procurement, ii) subsidized rates for gas and electricity, and iii) cost rationalization by phasing out lesser efficient spindles. Meanwhile, the Company have a strong financial profile, characterized by lean working capital cycle, strong coverages and low leveraged capital structure.

Additionally, predominant portion of long term borrowing is availed at the State Bank’s concessionary rates which has insulated the Company’s interest rate exposure, amidst high interest rate environment. The ratings drive comfort from Sponsor’s long association with textile business. The ratings are dependent on the Company’s ability to uphold its profitability and strong coverages, given recent commencement of socks manufacturing unit. Meanwhile, prudent working capital management will remain critical.

For more information, contact:
Analyst
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Email: hammad.rashid@pacra.com
Web: www.pacra.com